The current economic crisis is having a measurable affect on credit card companies, causing the industry as a whole to make changes as they struggle to maintain fiscal health and viability. What that means for the consumer is they will have to be vigilant in watching for how those changes will affect the cost of their credit.

 

According to a recent CNNMoney.com report, Capital One, a major credit card issuer, its number of loans that it doesn’t expect to be able to collect rose significantly during the month of January, a trend that most credit card issuers have been seeing. With personal bankruptcy on the rise, according to data from CardTrak.com, “rising 29% from one year ago and 11% sequentially,” it comes as no surprise that credit card issuers are seeing more delinquent accounts and feeling the pain of decreased revenue as consumers simply spend less.

 

In fact, according to a March 16, 2009, report in the Daily Herald, “Discover follows rival credit-card lender American Express Co. in becoming a bank so it could gain access to federal rescue funds.” Discover is said to have received “about $1.2 billion in cash from the Treasury to boost liquidity.”

 

These poor credit card performance numbers mean that credit card companies feel hard-pressed to make changes to try to cover losses and lower revenues. And, typically, those changes involve increasing the cost of credit, particularly for struggling consumers that under the strain of the current economic situation, including such factors as rising unemployment and a higher cost of living, may have seen a once strong credit rating fall downwards towards the bad credit category.

 

However, even those with good credit, people making their payments on time, are starting to feel the pinch as credit card companies change policies and rates seemingly out of the blue. That is why it is so important to keep up to date with credit card matters. An informed consumer won’t be caught by surprise with changes in rates, fees or other terms and conditions and also will know how to respond if such issues arise.

 

For example, according to a recent SmartMoney.com article republished on Yahoo Finance, “risk-averse card issuers are getting slash happy. And while many cardholders gripe that such cuts slice razor-close to their balance amounts, for an unfortunate few the cuts go far deeper: below what they currently owe.” As pointed out in the article, “Federal Reserve rules requiring lenders to give cardholders 45 days notice before reducing a credit line to the point that it would trigger penalties won’t go into effect until July 2010,” making this sort of fee-harvesting behavior perfectly legal right now.

 

On March 15, 2009, USA Today reported that “a growing number of banks are raising credit card fees or rolling out new fees to offset record delinquencies and rising charge-offs.” Many credit card companies have increased late fees and some have added fees to cards with a low interest rate, including Chase, which recently tagged a $120 fee onto some of its low interest cards.

 

Chase also has added a $10 per month fee to consumers carrying large balances and not paying them down at a sufficient rate and has raised the monthly minimum payment from 2 percent to 5 percent of the balance. Wells Fargo customers using their credit cards at a branch bank to get cash will now pay $20, and the ATM fee to do so will increase from $5 to $10. A Citigroup cardholder can see their interest rate shoot to almost 30 percent if they miss just one payment. Stories of surprise interest rate hikes on customers that haven’t even missed or been late with a payment are numerous.

 

Those are just a few of the current changes in credit card fees, rates, terms and conditions and consumers can probably expect more in the near future. If a sudden change does occur, one that a consumer believes is unjustified by their repayment performance and credit standing, a consumer can call the credit card company and try to negotiate more favorable terms, presenting their individual case. Even though times are tough in the credit card industry, a consumer who takes the time to contact their credit card company, working their way up the supervisor and account managing latter if need be, still stands a good chance at coming out with a favorable outcome.

 

These sometimes abrupt credit card term and condition changes have not gone unnoticed by lawmakers already casting a watchful eye on how credit card companies operate. As reported in the LA Times on March 15, 2009, “since the beginning of the year, millions of credit card customers have been hit with higher interest rates — in many cases from lenders that have received billions of dollars in bailout cash from taxpayers. Sen. Bernie Sanders, a Vermont independent, responded last week with legislation that would impose a 15% cap on rates for all consumer loans, including plastic.”

 

Knowing what is going on in the credit card industry is especially important these days, as credit card companies throughout the nation try to recoup their losses and reduced revenue from the consumer, often through practices that many find unfair, even abusive. Keep a close eye on your statements and carefully read any communication you receive from your credit card company. Take prompt action if you feel you are being treated unfairly and don’t be afraid to demand to speak supervisors, working your way up the chain of command as high as you need to. Being an informed consumer can save you money.

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